Three-tier Pricing Strategy for SaaS: Is It Still Perfect? -
What's the optimal amount of subscription tiers to an SaaS company?
Studies have revealed that three is the most common number. But do you think it's the best?
That's not what we found in our analysis of the pricing strategies of 50 most competitive SaaS businesses to create our 2022 pricing pages report.
We studied the pricing pages of fifty firms that were among the highest-rated in their market on G2 and discovered that the amount of monthly or annual plans that were offered ranged from no plans to 23 plans.
From zero to 23 plans, Best-in-Class SaaS Companies Customize Their Subscription Plans
Their packaging also varied the same.
"Keep things simple" is a common stipulation for SaaS businesses in terms of pricing and plans. But the subscription offerings for most top-of-the-line companies aren't easy to understand.
In this piece we'll discuss the best practices used by top-of-the-line SaaS companies promote and package their subscription packages, with many tiered pricing examples.
Three Tiers Don't Need to Mean Simple Plans
When we look at the pricing model with three tiers We typically see:
- A great option for smaller teams, individual users, or new customers trying to test the service.
- The middle-tier is used to upsells. It's usually referred to as the "most well-known" or "most cost-effective" option.
- A premium plan designed for people needing more.
While this holds true for the best companies that use a three-tiered pricing model, their packaging isn't always straightforward.
Pricing Changes Based on Number of Users
As an example, Canva uses three tiers however, the price of each one based upon the amount of users.
Three primary plans as a Jumping Off Point
Airbase advertises three primary levels, however their separate bill-pay option will take users to an entirely different set of plans altogether. Effectively, prospects choose between value-based pricing or volume pricing. This is one way to allow potential customers to choose which price they'd like to pay for.
We believe that SaaS companies may begin using a three-tier model however their pricing and pricing will naturally become more complex as their clients' needs change.
Four is the new Three (But Five Is Popular Too)
According to our analysis, the average number of plans available is in fact four. However, there are several most common methods for businesses that keep five or four pricing options.
Three Primary Plans Plus an Enterprise Plan
Why this works: It allows you to market middle plans and give the smaller and medium-sized customers (i.e. those who are not enterprise customers) that sweet spot to target.
Three Primary Plans as well as Two Enterprise Plans
A few companies, like Box have shifted to five plans that include two enterprise tiers. What's wrong with enterprise users having options too?
Free Plan Plus Three Paid Options
If you use a freemium model, then 4 different pricing levels might seem reasonable. Paid customers need room to move up into higher levels.
Free Plan plus Four Paid Options
Another time it is important to note that adding a fifth option gives your clients greater flexibility to increase their prices. However, when you add more tiers, it needs to be very clear on what you gain from switching to a higher cost. In this case, TalentLMS is differentiating based on the amount of users.
Think about the idea behind an Idea
While we were looking at pages on pricing for our guide, it was not always straightforward what should be taken into consideration as a month-to-month or an annual budget.
As an example, OneTrust Pro uses an a la carte method of creating a monthly plan.
Similar to that, Datadog offers a wide variety of plans that are based on their many offerings.
Instead of marketing tiers using price-based plans instead, Rippling is the only company that develops custom plans.
One sign it might be an opportunity to review a tiered model is if your prospects are expressing concerns or users that they're paying for functions or features they do not utilize. A different sign is when you've got multiple products that your existing customer base are paying for separately.
In general, the top-of-the-line SaaS firms think outside the box with regards to pricing and packaging. And if you're struggling to improve the tiered pricing structure you have Perhaps it's time for you to think outside of the box as well.
Create Plans (and/or Pages) when You Target New Markets
A company like ButterCMS covers the market all the way from start-ups to enterprises. Each primary persona is a different persona with their own strategy. If you're trying to sell to a different target market, make sure they're represented in your pricing pages before making contact with them or launching an advertising campaign.
Take a look at different tabs or pages that are geared towards specific Markets
36% of the businesses that we examined have multiple pricing pages or tabs when they serve several different markets, or offer separate plans for different products.
Tabs, like Mailchimp utilizes, makes it possible to view all prices on one single page, even though they're selling three unique products. The tabs offer clear differentiation among their offerings.
HubSpot goes one step forward with two tabs levels that offer different services and plans, as well as one for bundles. Sometimes, it's not necessary to upgrade to the next level. If you're offering multiple products, is it the right time to combine them?
How else can the best-in-class companies be Saying About Their Strategies?
Top-of-the-line companies might use diverse pricing structures, but we have found a variety of ways to explain the way they structure their pricing.
Some of the most popular pricing page features include:
- A FAQ section (72 72%)
- Add-ons to the plan that are mentioned (42 percent)
- This is the plan that has the highest popularity (36%)